Along with the broad market correction, auto stocks have declined in 2022. The S&P 500 Automobile Manufacturers Sub Industry Index has corrected by more than 20% during this period. This correction presents a good opportunity to accumulate some undervalued auto stocks.

The industry faces near-term headwinds that include inflation and a possible recession. Supply chain challenges have also impacted the auto industry. However, the long-term outlook remains robust. This is particularly true as the electric vehicle segment continues to grow at a healthy pace.

It’s worth noting that the global automotive market is expected to grow at a CAGR of 3.7% through 2030. For the same period, the electric vehicle market is expected to grow at a CAGR of 21.7%. It’s not surprising that traditional automakers are making a big shift toward electric vehicles.

With impending growth opportunities, it’s a good time to accumulate some undervalued auto stocks. My focus is on pure-play electric vehicle companies as well as traditional automakers that are positioned for growth.

Undervalued Auto Stocks: Li Auto (LI)

Li Auto (NASDAQ:LI) stock has been an outperformer among electric vehicle stocks in the last six months. Even after the rally, LI stock is among the top undervalued auto stocks to consider.

There are three major reasons to like Li Auto from among Chinese electric vehicle stocks. First, the company has reported strong growth in vehicle deliveries on a sustained basis. For July 2022, Li reported 21.3% growth in deliveries on a year-over-year basis to 10,422.

Further, since launch in November 2019, Li Auto has delivered growth with just one model, LI ONE. As of July 2022, the cumulative deliveries of Li ONE have reached 194,913. The company’s second model, Li L9, a smart SUV, will be open for mass deliveries in August 2022. In the coming quarters, the new model will help in accelerating deliveries growth.

Another important point to note is that Li reported free cash flow of $79.2 million for Q1 2022. As FCF swells, Li will be positioned to make bigger investments.

Tesla (TSLA)

In the recent market correction, Tesla (NASDAQ:TSLA) stock had plunged to lows of $620. It didn’t take long, however, for the leading electric vehicle company to bounce back. TSLA stock is higher by 46% from lows at $910.

There is another stock split in the cards for Tesla. However, the rally is factoring in several positive catalysts. With production and mass deliveries for the Cybertruck and Roadster likely in the next 12-24 months, there is a catalyst for deliveries growth.

Further, the European Gigafactory might be incurring losses currently. However, once manufacturing is ramped up, it will boost sales and help in improving the company-wide EBITDA margin.

Given strong cash flows, Tesla is also positioned to make big investments. There is a possibility of another Gigafactory in Indonesia.

In terms of risks, geopolitical tensions might impact the company’s outlook for growth in China. However, Tesla remains positioned for sustained growth and upside in free cash flows.

Undervalued Auto Stocks: Ford Motor (F)

Among traditional automakers, Ford Motor (NYSE:F) seems attractively valued. It’s worth noting that F stock has surged by 31% in the last month. However, the stock still trades at a forward price-earnings-ratio of 7.9x.

One reason for the recent rally is the company’s earnings beat for Q2 2022. The company has also provided investors a reason to cheer with an optimistic guidance. Ford expects adjusted free cash flow of $5.5 billion to $6.5 billion for 2022.

Another reason for F stock trending higher is the company’s ambitious plans for the electric vehicle segment. For 2022, Ford has reaffirmed the guidance for production of 600,000 EVs. Further, the company is targeting production of more than 2 million units (annually) by the end of 2026.

From a financial perspective, Ford reported a total liquidity buffer of $45.1 billion as of Q2 2022. The company has a robust balance sheet to invest in growth. At the same time, dividends are sustainable with the company currently offering a dividend yield of 1.9%.

General Motors (GM)

General Motors (NYSE:GM) stock has been in a correction mode with a decline of 38% for 2022. At a forward P/E of 5.4x, the downside for GM stock seems to be capped. With General Motors also committed to an all-electric future, there is a reason to be optimistic.

Talking about the growth plans, General Motors expects to have 1 million units of annual EV capacity in North America by 2025. The company has already been securing commitments for lithium, cobalt and nickel.

Over the long-term, the company expects to deliver $90 billion in annual EV revenue by 2030. This seems realistic considering the under-penetration of electric vehicles globally.

General Motors has guided for adjusted automotive free cash flow of $7 billion to $9 billion for 2022. The company expects to double revenue from current levels by 2030 along with EBITDA margin expansion.

Given this guidance, free cash flow is likely to be in excess of $20 billion by 2030. GM stock is therefore likely to be a long-term value creator.

Undervalued Auto Stocks: Rivian Automotive (RIVN)

Rivian (NASDAQ:RIVN) has surged roughly 100% from 2022 lows near $19.30. However, RIVN stock remains undervalued from a long-term perspective.

For Q2 2022, Rivian delivered 4,467 vehicles. The company has also reiterated the guidance to produce 25,000 vehicles for 2022. However, this is just the beginning of the long-term growth story.

To put things into perspective, the company plans to increase annual production capacity to 600,000 between Normal and Georgia plants. With $17 billion in cash and equivalents as of March 2022, the company is positioned to make aggressive investments.

It’s also worth noting that Rivian already has more than 90,000 pre-orders for R1 from the U.S. and Canada. With potential expansion in Europe and China in the next few years, there is a big addressable market. Deliveries growth is likely to be robust on a sustained basis.

Rivian also has an initial order for 100,000 electric delivery vans from Amazon (NASDAQ:AMZN). With potential for big orders in the EDV segment, the revenue visibility is robust.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.